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Critics call for halt to CPP investments in tobacco companies

July 11th, 2008

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Anti-smoking groups and the NDP called on Finance Minister John Manley to set up ethical screens to stop the Canada Pension Plan Investment Board from using its funds to support the sale of tobacco products. Tobacco kills as many as 45,000 Canadians a year and doesn't deserve the financial support of the multibillion-dollar national pension fund, critics said.

With about $55 billion in assets, the CPP is hugely influential and must be very careful about where it invests, said NDP MP Peter Stoffer.

Yet the CPP Investment Board, which is slowly moving to invest the bulk of the plan's assets in the stock market, continues to support tobacco firms, he said.

That's inconsistent and even counterproductive to the effort Ottawa has put into fighting tobacco use, including campaigns against cigarette ads, said Stoffer.

"It's hypocritical, to say the least," he said.

"If Canadians knew .?.?. their pension dollars, in essence, are aiding and abetting the killing of close to 45,000 people a year in Canada, I think they would be quite astonished indeed."

Ottawa brought the federal Tobacco Act into force in 1997 making it illegal for cigarette companies to advertise their sponsorship of groups and events.

Health critics have said one flaw in the act is that such companies are able to reach young Canadians through U.S. magazines and the Internet and last month petitioned Ottawa to strengthen controls.

Canada's big three tobacco firms are challenging the constitutionally of the law, calling it denial of free speech.

On Thursday, critics said allowing the CPP to support the tobacco industry is also inconsistent with the large infusions of cash Ottawa is planning to put into medicare.

Prime Minister Jean Chretien pledged to spend much more money on health care following last week's Romanow commission report.

It called for as much as $15 billion in new health spending over the next five years.

It's not clear how much the public pension fund has invested in tobacco companies but the CPP Web site shows at least $5 million in Imperial Tobacco.

A Manley spokesman said the pension investment board operates at arms-length from the federal government and sets its own investment policies.

It isn't the board's job to decide for Canadians what's ethical, said John MacNaughton, chief executive officer for the CPPIB.

"Screening works for sure, for individuals who know their minds; it works for groups of like-minded individuals, but it doesn't necessarily work for 16 million people who have different views on a variety of issues," MacNaughton said in an interview.

The board does have a social investing policy that favours companies with good labour and environmental practices which should, in the long run, mean better returns because they'll be more sustainable.

By that logic, tobacco companies would be a "very dubious proposition" for investors because lawsuits by governments and individuals will eventually damage their earnings and undermine shareholder value, said Francis Thompson of the Non-smokers' Rights Association.

But even if the CPP takes a small loss as a result of shifting out of investments in tobacco companies, Stoffer said he believed Canadians would accept that to avoid supporting the industry.

Debate has raged in recent years over what constitutes ethical investment and how pension plans should balance that against the need for healthy payouts.

Parliament should set criteria for the Canada Pension Plan after a full debate, said Stoffer.

The federal government is in the process of transferring control of all CPP assets to the investment board as part of a wider program of making the program self-sustaining.

The CPP's assets include $38.4 billion in fixed-income securities administered by the federal Finance Department and $16.9 billion in equities managed by the CPP Investment Board based in Toronto.